AL CHAMPDANY INDUSTRIES LIMITED versus THE OFFICIAL LIQUIDATOR & ANR.

Citation: [2009] 2 S.C.R. 705 · Decided: 19-02-2009 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

.. :t: • 
[2009] 2 S.C.R. 705 
Al CHAMPDANY INDUSTRIES LIMITED 
V. 
THE OFFICIAL LIQUIDATOR & ANR. 
Civil Appeal No. 1118 of 2009 
FEBRUARY 19, 2009 
[ S.B. SINHA AND ASOK KUMAR GANGULY, JJ.] 
A 
B 
Companies Act, 1956 - ss. 529, 529A and 530 - Sale of 
assets of company in liquidation - Claim of arrears of property . 
tax by Municipality from purchaser for period prior to date of 
purchase - High Court holding that tax payable to Municipality C 
was encumbrance and it could not avoid payment for not 
making enquiry - Held: Not sustainable - Municipality was 
unsecured creditor and not preferential creditor - Dues in 
relation to municipal tax does not create any encumbrance or 
charge on property - It is considered to be a personal liability D 
- Fact that company went in liquidation was given due publicity 
- Municipality did not file its claim before official liquidator 
noi stood in queue to get the same recovered/adjusted from 
sale proceeds - More so, advertisement did not specify that 
all public charges have to be paid - Transfer of Property Act, 
E 
1882- s. 55. 
Words and phrases: 'Encumbrance' - Meaning of. 
A company went in liquidation. Appellant purchased 
the assets of the company. The company judge confirmed F 
the sale. Thereafter, respondent-Municipality served a 
notice to appellant claiming payment of arrears of property 
tax. Appellant took out chambers summons for 
clarification that sale confirmed in their favour would make 
them liable for payment of property tax only on and from G 
the date of confirmation of sale and not for any period 
prior thereto. Both the Single Judge as ·also the Division 
Bench of the High Court held that since the inventory was 
made on "as is where is and wh~t~yer there is" basis, the 
705 
H 
706 
SUPREME COURT REPORTS 
[2009] 2 S.C.R. 
A 
offerer was to satisfy themselves in regard to the physical 
inspection of the assets/properties as to the title, 
encumbrance etc. of the assets of the company in 
liquidation. Hence the present appeal. 
B 
Allowing the appeal, the Court 
HELD: 1.1 All claims against the companies were 
required to be filed before the liquidator until the property 
was sold as provided for under s. 457 of the Companies 
Act. .In terms of s. 456 thereof once an order for winding 
up is made the liquidator has to take 'into custody the 
C properties; effects and actionable claims to which the 
company is or appears to be entitled. S. 528 provides that 
all debts payable on a contingency and all claims against 
the company, present or future are admissible to proof 
against the company. S. 529 provides for the same rule 
D as in force for the time being under the law of insolvency 
with respect to the estates of person adjudged insolvent. 
Section 530 provides for certain prforities to secured 
creditors· and other unsecured creditors. Once the 
property is sold, the assets of the company are required 
E to be distributed to the creditors in order of preference. 
Companies Act or any other law does not impose· any 
additional' obligation upon the purchaser to make an 
enquiry with regard to the liabilities of the companies 
other than thos~ _y1h.if::!l would impede its value. [Paras 15 
F 
and 20] [ 717-8-E; 713; 714-H] 
1.2 In terms of the s.55(1) (g) of the Transfer of 
Property Act, the seller is bound to pay all public charges 
due in respect of the property upto the date of sale, when 
a property is sold in auction. Section 55 refers to a contract 
G only. Unless there is a contract to the contrary, the rights 
and obligations of the parties to a sale would be as 
indicated ins. 55. Such·a contract to the con~ra..Y'inust be 
express and not implied, as a result whereof the'' meaning 
of term encumbrance would be expand~~· [~ara 19] 
H [716-F] 
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Al CHAMPDANY INDUSTRIES LIMITED V. 
707 
THE OFFICIAL LIQUIDATOR & ANR. 
1.3 The terms and conditions of the sale must be read 
A 
,.,_, 
as a whole. It must be given a purposive meaning. The 
word 'encumbrance' in relation to the word 'immovable 
property' carries a distinct meaning. It ordinarily cannot 
be assigned a genera and/ or dictionary meaning. 
Encumbrance must be capable of being found out either B 
on inspection of the land or the office of Registrar or a 
statutory authority. A charge, burden or any other thing 
• which impairs the use of the land or depreciates in its value 
...( 
may be a mortgage or a deed of trust or a lien or an 
easement. Encumbrance thus must be a charge on t

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